• Banking & Finance: DRT & DRAT

  • A strong banking system is an indicator of the economic development of any nation. Banks are important segment in Indian Financial System. An efficient and vibrant banking system is the back bone of the financial sector. The major functions of banks are to accept deposits from public and provide lending to the needy sectors. Besides, commercial banks, cooperative credit institutions also plays important role in the rural economy of the country. Development banks like NABARD, SIDBI, NHB and EXIM Bank are providing refinance facilities to commercial banks and other financial institutions. The Reserve Bank of India as the Central Bank of the country plays different roles like the regulator, supervisor and facilitator of the Indian Banking System. The Banks in India can be classified as follows:- (i) Reserve Bank of India [RBI], (ii) Commercial Banks [Scheduled Non Scheduled Banks] [Public Sector Banks, Private Sector Banks, Foreign Banks, Local Area Banks, Regional Rural Banks], (iii) Development Banks [National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), Export-Import Bank of India (EXIM Bank) & National Housing Bank (NHB)], (iv) Co-Operative Banks [Short Term Credit Institutions, Long Term Credit Institutions, Short Term Agricultural Credit Institutions, Long Term Agricultural Credit Institutions].

    Both, the government and the RBI possess all major powers in regard to Banks, namely, powers to open new banks and branches, licensing of banking companies, management of banking companies, constituting of board of directors, Etc. These have final say on rights of the board directors and that of the rights of banks share holders. The government and RBI have powers to control CRR and SLR, cash currency management, winding up, amalgamation and mergers, advances, monetary and credit policy, etc. In nut shell, the government and the RBI have at their command all powers of supervision and control.

    The Provisions of RBI Act 1935, the Banking Regulation Act 1949, and the Prevention of Money Laundering Act, 2002 provide for regulatory framework and compliances. Other legal statutes governing the banking affairs in India are as follows: the Companies Act, 1956, the Negotiable Instruments Act, 1881, the Indian Contract Act,1872, the Recovery of Debts Due to Banks and Financial institutions Act, 1993 (DRT Act), the Securitisation and Resconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI Act], the Law of Limitation, Bankers’ Book Evidence Act, 1891, the Consumer Protection Act, 1986, the Foreign Exchange Management Act, 1999 [ FEMA], etc.

    The Debts Recovery Tribunals have been established by the Government of India under an Act of Parliament (Act 51 of 1993) for expeditious adjudication and recovery of debts due to banks and financial institutions. Where a bank or financial institution has to recover any debt from any person, it makes an application called Original Application (OA) to the Tribunal against such person. The DRTs function under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and as per the Debts Recovery Tribunal (Procedure) Rules, 1993. The provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 shall not apply where the amount of debt due to bank or financial institution or to a consortium of banks or financial institutions is less than 10 lakhs rupees or such other amount, being not less than 1 lakh rupees, as the Central Government may, by notification, specify. The Court fee payable as per Rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993 is Rs.12,000/- where an amount of debt due is Rs.10.00 lakhs, Rs.12,000 plus Rs.1000 for every one lakh of debt due or part thereof in excess of Rs.10.00 lakhs subject to a maximum of Rs.1,50,000/- where an amount of debt due is above Rs.10.00 lakhs. The Court fee for Review Application is 50% of the fee paid for the OA.The fee for filing Interlocutory Application (IA) is Rs.250/-. The Court fee for filing Vakalatnama is Rs.5/-.The Court fees is Rs.12,000/- if the amount appealed against is less than Rs.10 lakhs, Rs.20,000/- if the amount appealed against is Rs.10 to 30 lakhs, Rs.30,000/- if the amount appealed against is more than 30 lakhs.

    Hello Counsel acts for Banks, and also represents a number of Institutional Lenders; Export Credit Institutions; Asset Managers; Funds & Real Estate Investors; Arrangers and Corporate Borrowers. We have extensive experience in diverse types of Banking & Finance transactions. Our practice covers a wide range of financing transactions. Our scope of work covers the entire spectrum- structuring transactions, drafting term sheets and transactional documents, negotiations, advising on the regulatory framework and related issues.  

    We are rendering legal services in various aspects of the banking and financial sector. We advise domestic and international financial companies, institutions and banks including non-banking financial companies on securitization laws, securities, derivatives, restructuring, banking and insolvency, asset finance, project finance and insurance. Our legal team possess significant experience with legislations and regulations concerning securities, securities transfers and privacy, including collection, use and disclosure of information in a financial context.

    We advise our clients on provisions under the Banking Regulation Act, 1949 and notifications issued by the RBI. We also advise clients on structuring of foreign investments in the banking sector in India including foreign exchange regulations under FEMA.

    Services rendered by our Legal Team in the financial sector include acquisition finance, project finance, legal opinions, drafting escrow, consortium, mortgage, pledge and lien agreements and loan agreements, credit & security documentation. Our Firm also deals in securitization of assets, cases with respect to dishonor of cheques, debentures, guarantees and other forms of securities, etc. We represent our clients all over India in civil and criminal litigation, consumer matters and arbitration.

    We deal in all matters connected with DRT, ADRT and Securitization Act including drafting of DRT replies, counter-claims, counter-suits, suits, writ petitions, etc. We represent financial institutions & Banks and various private equity investors and financial sponsors for finance of corporate mergers and acquisitions, equity investment, distribution of IPOs, etc.

    We also assist our clients in complying with RBI regulations, company laws, capitalization norms and acquiring required statutory approvals. Our Firm has advised number of clients in raising funds through QIPs, issuance of commercial papers, net owned fund, fit and proper norms, capital adequacy norms, ceiling on credit investment concentration, know your customer norms, repossession of the assets on default, etc. We also advise them on bank finance, mode of employment, facilitated regulatory clearances and facilitate entry routing and business set-up of various multinational companies.

    Vital Features Of Banking & Finance

    • Acquisition
    • Asset Finance
    • Banking & Finance Transactions- Syndicated Lending, Structured Products, Project Finance, External Commercial Borrowings & Plain Vanilla Bilateral Lending Deals.
    • Bank Guarantee 
    • Corporate Debt- Syndicated Loans, Secured And Unsecured Loans, Revolving Credits, Guarantee Facilities & Other Forms Of Security
    • Derivative Transactions
    • Debt Capital Markets- Rupee Denominated Bonds- Debentures- Foreign Currency Convertible Bonds- Bank MTN Programs- Other Securities
    • Debt Restructuring And Re-financing- Asset Reconstruction & Schemes Of Arrangement
    • Global & Domestic Banks
    • Institutional Lenders & Corporate Borrowers- Multi-Lateral, Developmental & Export Credit Institutions, Asset Managers, Funds, Real Estate Investors, Arrangers.
    • Leveraged Finance Using Senior, Mezzanine And Subordinated Debt
    • Negotiations
    • National Banking & Finance  
    • Project Finance
    • Public Private Partnerships- Across All Infrastructure And Energy Sectors
    • Regulatory Framework And Related Issues.
    • Real Estate Finance- Structured Lending, Secured Property Lending And Property Securitization
    • Structured Finance
    • Term Sheets- Transactional Documents
    • Transactions Structuring   

    Banking & Finance- Court & Fora In India

    • Arbitration Tribunal
    • Commercial Courts, Commercial Division and Commercial Appellate Division:- In the High Courts of various States, particularly the High Courts of Delhi, Bombay, Calcutta and Madras, where the Original jurisdiction above a certain value lies in High Court.- Appeal lies from the orders passed by tribunals like Competition Appellate Tribunal, Debt Recovery Appellate Tribunal, Intellectual Property Appellate Board, Company Law Board, National Company Law Tribunal, Securities Appellate Tribunal and Telecom Dispute Settlement and Appellate Tribunal, Etc 
    • Debt Recovery Tribunal [DRT]
    • Debt Recovery Appellate Tribunal [DRAT]
    • Reserve Bank Of India [RBI]

    Legislations Governing Banking & Finance Laws

    Banking & Finance- Judgments

    • International Asset Reconstruction Company Of India Ltd. Versus The Official Liquidator Of Aldrich Pharmaceuticals Ltd. -SC-24.10.2017- Civil Appeal No.16962 OF 2017- DRT has no power to condone delay under limitation Act.
    • Madras Petrochem Ltd. & Anr. Versus BIFR & Ors., Civil Appeal Nos.-614-615 OF 2016, Judgment Dated: 29.01.2016, Bench: Kurian Joseph & R.F. Nariman, JJ, Supreme Court OF India- SARFAESI Act- Held, “54. The resultant position may be stated thus: 1. Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will continue to apply in the case of unsecured creditors seeking to recover their debts from a sick industrial company. This is for the reason that the Sick Industrial Companies (Special Provisions) Act, 1985 overrides the provisions of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993. 2. Where a secured creditor of a sick industrial company seeks to recover its debt in the manner provided by Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, such secured creditor may realise such secured debt under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, notwithstanding the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. 3. In a situation where there are more than one secured creditor of a sick industrial company or it has been jointly financed by secured creditors, and at least 60 per cent of such secured creditors in value of the amount outstanding as on a record date do not agree upon exercise of the right to realise their security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will continue to have full play. 4. Where, under Section 13(9) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, in the case of a sick industrial company having more than one secured creditor or being jointly financed by secured creditors representing 60 per cent or more in value of the amount outstanding as on a record date wish to exercise their rights to enforce their security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, being inconsistent with the exercise of such rights, will have no play. 5. Where secured creditors representing not less than 75 per cent in value of the amount outstanding against financial assistance decide to enforce their security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, any reference pending under the Sick Industrial Companies (Special Provisions) Act, 1985 cannot be proceeded with further – the proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 will abate. 55. In conclusion, it is held that the interim order dated 17.1.2004 by the Delhi High Court would not have the effect of reviving the reference so as to thwart taking of any steps by the respondent creditors in this case under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. This is because the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 prevails over the Sick Industrial Companies (Special Provisions) Act, 1985 to the extent of inconsistency therewith. Section 15(1) proviso 3 covers all references pending before the BIFR, no matter whether such reference is at the inquiry stage, scheme stage, or winding up stage. The Orissa High Court is not correct in its conclusion on the interpretation of Section 15(1) proviso 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. This being so, it is clear that in any case the present reference under Section 15(1) of the Appellant No.1 company has abated inasmuch as more than 3/4th of the secured creditors involved have taken steps under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The appeals are accordingly dismissed.
    • Pacquik Industries- The Pradeshiya Industrial & Investment Corporation Of U.P. Ltd. Versus M/S Pacquik Industries Ltd. & Ors.- Co.App. 54/2013, Judgment Dated: 28.01.2016, Bench: Gita Mittal & P.S.Teji, JJ, Delhi High Court- Issue, Unnecessary Litigation by Government & Public Sector Undertakings (paras 201 to 2017) - The judgment opens up with the following excerpts, “"Power vested by the State in a Public Authority should be viewed as a trust coupled with duty to be exercised in larger public and social interest. Power is to be exercised strictly adhering to the statutory provisions and factsituation of a case. 'Public Authorities cannot play fast and loose with the powers vested in them'. A decision taken in arbitrary manner contradicts the principle of legitimate expectation. An Authority is under a legal obligation to exercise the power reasonably and in good faith to effectuate the purpose for which power stood conferred. In this context, "in good faith" means "for legitimate reasons". It must be exercised bona fide for the purpose and for none other.
    • RPP Infra Projects Ltd. Versus. NTPC Tamil Nadu Energy, O.M.P. 924/2014, Judgment Dated: 16/12/2014, Bench: Deepa Sharma, J., Delhi High Court- Citation: 2015(3) R.A.J. 29: 2015(1) ArbLR 242- Banking & Finance- Bank Guarantee- Stipulation of amount payable without demure or objection, effect of- Held, bank guarantees in dispute, clearly in unequivocal terms and unconditionally recite that amount would be paid without demure or objection- Bank guarantee thus is an independent contract between bank and beneficiary and can be challenged only on ground of fraud and irreparable injury.- Hindustan Construction vs. State of Bihar, (1999) 8 SCC 436, Relied on (Para 12).

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